Editorials: Where I rant to the wall about politics. And sometimes the wall rants back.

Taxing the rich to pay for preschool in California

Jerry Stratton, April 30, 2006

Right. So I finally publish my rant on vouchers a few weeks ago, and now this week I get the list of propositions in California’s primary. Proposition 82 in California proposes to add a tax on people who make more than $400,000 to pay for pre-school for all four-year-old children in the state.

My first reaction is, at what point do we just pull children aside as soon as they’re born and pump them through the state’s sausage grinders? Four years old? Orwell was Benjamin. None of you has ever seen a dead satire.

But it gets funnier. I mean, there are the little things, such as the $400,000 threshold for being taxed not being indexed to inflation. The income tax was originally a tax on the rich, too (and by “rich”, I mean the traditional definition: people who make more money than I do; see Flat Tax). Inflation ensured that everyone eventually had to pay an income tax. The way things are going now, $400,000 as a middle-class income isn’t far away. Then everyone will be paying an additional 1.7% tax on income above this threshold.

I wonder how many other taxes like this are waiting in the wings for inflation to make them universal? The middle class is already hitting the Alternative Minimum Tax. That one was implemented in 1970 in response to 155 really rich people not paying taxes. This year, 20 million qualified for the AMT. Like the income tax itself, the AMT wasn’t indexed.

Nor is the funny part that the proposition includes an escape clause that lets the state ask for “parent contributions”. (See Section 7, Article 6, Section 14132.d.2.) That’s par for the course.

No, the funny part is that the $400,000 cutoff is not the whole story. Section 8, Section 17041.1.a says:

Four hundred thousand dollars ($400,000) in the case of an individual who is not a married individual, or a married individual who does not make a single return jointly with his or her spouse.

Married households that file a joint return have a cutoff of $800,000, so there’s at least a 1.7% incentive to file jointly for any couples whose combined income is between $400,000 and $800,000.

This means that the bulk of this tax is likely to come from unmarried individuals who make more than $400,000. I don’t know what the single-parent rate is for people who make more than $400,000, but I’d guess it’s pretty small. This proposition pays for “preschool for all” by taxing rich people with no children. If inflation ever makes $400,000 middle class, it will pay for preschool by taxing middle class people with no children.

One thing I do like about this proposal is that it earmarks a specific percentage for a specific purpose and forbids the money from going anywhere else as well as forbids money from coming from anywhere else. That’s the way taxes should be, so that we can tell exactly where our money is going and what we are paying for.

Rather than authorizing “parent contributions”, though, taxes should simply be repealed if the projects they’re paying for go over budget. The people who want that project should have to come back later with a new plan and convince the voters to pay for the new, more expensive plan. Lowballing and then authorizing emergency revenue streams ensures that projects will go over budget.

But mainly, the tax just isn’t fair. If we truly feel that we need to start sending kids off to school at four, we should pay for it with a tax on everyone. It would be correspondingly smaller because more people would be paying it and we would vote for it only if we all were willing to pay up.

Obviously, other statistics I don’t have access to could make proposition 82 less odd in reality. Perhaps everybody who makes more than $400,000 gets married and has kids. That’s not an issue I’m likely to ever test. Perhaps other complications of our ten-million-word tax code make filing jointly unlikely at those levels. But give it time. The Alternative Minimum Tax On Rich People took less than thirty-six years to start hitting the middle class.

Proposition 82 vies with proposition 81 for just plain bad ideas. Proposition 81 pays at least $1.2 billion in order to buy no more than $600 million worth of library improvements. We need to get off of the bond addiction here in California, but given our message to Schwarzenegger in 2005 (“when we said no new taxes, we didn’t mean to stop spending money, you idiot!”), that’s not likely to happen. Perhaps we’ll just sell bonds to pay off our bonds. Or perhaps we’ll indoctrinate our four-year-olds into buying bonds.

If we’re going to saddle our kids with debt we might as well be upfront about it.

“The AMT does not correct for inflation, leading to unplanned effects as time goes by. Starting around 2004, the AMT began affecting middle-class incomes, at least by the standards of areas with high cost of living.”

“It will encroach dramatically on the middle class, affecting 37 percent of households with income between $50,000 and $75,000 and 73 percent of households with income between $75,000 and $100,000 (compared to less than 3 percent for each group in 2002).”

The Alternative Minimum Tax is tax reform at its worst. Instead of fixing the tax law complexity that allowed rich taxpayers to pay less tax, it added an entirely new level of complexity that is ensnaring more and more taxpayers every year.

By this time, California had to know that its new law would not bring in new tax revenue. The tax headaches aren’t worth the trouble of maintaining affiliate programs. The only reason to pass the law was to kill affiliate programs at places like Amazon and Overstock. I don’t understand; what is it about affiliate programs that states don’t like?

The left wants to take the policies that are consolidating small businesses into larger ones, and use them to consolidate small churches into larger ones. They want to leverage milker bills and rent-seeking in religion.

Lost?

Failure to use tax money to finance things not liked by the taxpaying public is routinely called ‘censorship.’ If such terminology were used consistently, virtually all of life would be just one long, unending censorship, as individuals choose whether to buy apples instead of oranges, vacations rather than violins, furniture rather than mutual funds. But of course no such consistency is intended. This strained use of the word ‘censorship’ appears only selectively, to describe public choices and values at variance with the choices and values of the anointed. — Thomas Sowell (The Vision of the Anointed)